Changes to R&D tax credits announced last week by chancellor Jeremy Hunt are still likely to hit small and medium-sized firms that rely on the scheme the most, according to experts.
In last week’s Spring Statement, Hunt announced he will still cut the deduction rate for the SME part of the scheme from 130 per cent to 86 per cent and the credit rate from 14.5 per cent to 10 per cent.
However, the rate will remain at 14.5 per cent for R&D intensive SMEs – defined as those that spend more than 40 per cent of their expenditure on R&D.
R&D tax specialists Zest R&D, believes that Chancellor Jeremy Hunt’s Spring Statement is a mixed bag for organisations that benefit from the government’s Research and Development (R&D) tax relief schemes.
Zest R&D works closely with clients to help them claim R&D tax relief through the government schemes that are designed to incentivise innovation and research.
Adam Park, R&D Tax Specialist at Zest R&D said: “Hunt’s announcement does provide some good news for R&D intensive SMEs, which might include software start-ups, med-tech companies, or any company recently setup to perform substantial R&D to develop a new product. However, the concession is relatively restrictive.
To soften the blow, the chancellor announced additional tax support for eligible research intensive startups (in fields like AI, life sciences and fintech), which will be able to claim £27 for every £100 spent on R&D.
Adam added “Many companies will not meet the threshold of 40 per cent of their expenditure on R&D, and so will be left in the lurch, with lower rates of funding for their R&D work.
“This is work which could be equally as beneficial to the economy as other companies spending more, as a % of their total expenditure, on R&D. Many SMEs and those involved in the R&D community would have been hoping for more significant concessions to the headline rates to help fuel R&D in the UK.”